Growth in demand for credit by South Africa’s private sector slowed slightly in August but money supply quickened, leaving the door open for higher interest rates.
Central bank data on Monday showed credit demand growth eased to 22,91% year-on-year from 23,13% in July, above forecasts. M3 money supply growth quickened to 25,80% from 24,46% previously, also outpacing expectations.
Analysts said the pace of growth, particularly of money supply, remained a concern and offered no respite to expectations of another interest rate increase next week.
”On the PSCE [private sector credit extension] I think it’s comforting that there is that slight deceleration. However, it’s still a worry because PSCE is a sub-set of M3. If M3 is still on the upside then it’s probably still a worry,” Eskom economist Mandla Maleka said.
”The decision on interest rates could be very close because of the [acceleration in] money supply.”
The rand currency was little changed at 6,8895 against the dollar after the release of the figures, while the yield on the benchmark 2015 bond had ticked up two basis points to 8,275% by 6.31am GMT.
Economists and markets are divided on whether South Africa’s central bank will raise its repo rate again at its October 10 to 11 policy meeting, after lifting it by 50 basis points each in June and August to 10%.
These brought the total of rate increases since June last year to three percentage points as the central bank has tried to tame rising inflationary pressures and robust consumer spending, partly financed by credit.
A Reuters poll of 12 economists forecast that private sector credit growth would slow to 22,73% while the annual growth in M3, which often points to inflationary pressures in the economy, was seen growing by 24,4%. – Reuters